An estimated 425,000 of Gaza's 1.8 million people without a home and in need of shelter, aid

* Gaza cannot afford to return to pre-war situation - UNRWA

* Israeli and Egyptian blockade of territory must end

* Five-day ceasefire to expire at 2100 GMT

By Nidal al-Mughrabi

GAZA, Aug 18 (Reuters) - Unless negotiations to end the Gaza war succeed in lifting a blockade of the territory, Gazans will not see any improvement in their lives for at least another 15 years, the head of a U.N. relief agency said on Monday.

Israeli and Palestinian negotiators are in Egypt trying to secure a permanent ceasefire after a month of fierce fighting in the Gaza Strip destroyed whole neighbourhoods and forced hundreds of thousands of people to flee their homes.

One of the core demands of the Islamist group Hamas, which controls Gaza, is the end to a long-running, Israeli-Egyptian blockade of the enclave that has stymied the economy and slowed or prevented the import of even basic building materials.

"The question will be, is it a ceasefire that brings us simply back to the pre-existing condition under the blockade?" Pierre Krahenbuhl, the head of the United Nations Relief and Works Agency (UNRWA), said in an interview.

"If that is the case, it will take years and years and years to rebuild," he said, emphasising the length of time it takes to get building materials, construction equipment and other goods across the Israeli and Egyptian borders into the territory.

"With the extent of destruction that has taken place, you cannot really imagine that we would achieve anything before 15 years or more," unless the pace of importing goods changes.

Palestinian negotiators in Cairo are also want Israel to allow the construction of a seaport and the reconstruction of Gaza's airport - Yasser Arafat International - which was bombed by Israel at the start of a Palestinian uprising in 2001.

Israeli and Egyptian officials have indicated a willingness to loosen the blockade as long as the Palestinian Authority - overseen by the Western-backed President Mahmoud Abbas - takes over administration of the borders from Hamas.

But Israel is cautious about any wholesale lifting of border restrictions. Many building materials that entered Gaza in recent years were used by Hamas to build reinforced tunnels that militants then used to attack Israel.

Israel also wants the demilitarisation of Gaza, a move backed by the European Union and others but one that Hamas has said it is not prepared to take. The current, five-day ceasefire will expire at 2100 GMT on Monday unless progress is made in Cairo. The signs so far are not encouraging.

BILLIONS OF DOLLARS

The month-long war - the most destructive since Israel unilaterally withdrew from Gaza in 2005 - has left more than 2,000 Palestinians dead, most of them civilians, as well as 64 Israeli soldiers and three civilians in Israel.

Beyond the loss of life, major elements of Gaza's infrastructure have been crippled, including its only power station, its water treatment centre and agricultural lands.

Some estimates suggest it could cost up to $10 billion to rebuild all the homes, roads, bridges and other infrastructure that has been wrecked. Krahenbuhl said it was clearly in the billions, but said his first priority was taking care of the displaced, with an estimated 425,000 of Gaza's 1.8 million people without a home and in need of shelter and other aid.

While UNRWA could provide emergency assistance, bold steps were needed if the territory is to be able to stand on its own feet, he said. "There is no actor who can resolve this alone if we go back to the pre-existing conditions under occupation and blockade," said Krahenbuhl, a Swiss national.

"If this does not change, if that paradigm does not change, if there is not something that brings a new paradigm, a new deal, new hope for the people in terms of opening up," then Gaza would be consigned to "incredible difficulties" he said.

UNRWA has been working in the region since 1949, originally helping refugees from the war that ensued from Israel's founding in 1948. One of its main responsibilities now is running schools and clinics throughout Gaza.

During the war, half a dozen of its schools were hit by Israeli artillery, killing at least 25 people sheltering there. Militant rockets were also found hidden in three of its empty schools. Eleven UNRWA staff were killed in the conflict.

Krahenbuhl condemned armed groups for hiding weapons in the schools, saying it was damaging to UNRWA's ability to be seen as a neutral actor. He was also critical of Israel for failing to learn lessons from a 2008-9 conflict, when UNRWA schools were also hit by Israeli shelling.

"On those cases where we saw irrefutable evidence that Israeli shells were involved we came out publicly, we denounced it, we attributed responsibility for it to Israel and we have asked for an investigation," he said. (Editing by Luke Baker and Crispian Balmer)

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